Paul and Dana are a young couple looking for a starter home. They visited a reliable real estate site_ to choose a house they can
afford. It has all the homes for sale in their area that are listed on the multiple listing service. They have also consulted with a_a
professional who helps people buy and sell
homes. The person who sells them a home will have to pay their realtor a_
They have a_
monthly income of $3600
minus all their other debt payments. So, according to their realtor, they can afford a payment that is 36% of that monthly income or S1296. But they
need to worry about additional monthly expenses like_
taxes and homeowner's
Their bank, or_
holder, will most likely put that extra money into a third party, separate_
account. Because interest rates are currently low, they opted
for a_
interest-rate loan that would provide security for them in case interest rates go up in the future. They know that an
_-rate loan can go up with market rates. They might consider giving the bank some cash called a_
which would get
them an even lower interest rate.